Field of Schemes

Associated Press, September 27, 1997: A dime-sized finished diamond that tips the scales at more than 16 carats, found in a Colorado mine, may be the biggest cut stone of its kind from North America.

Rocky Mountain News, November 19, 1872: The Denver Diamond Company has "had prospectors in the field for some time past, and are fully assured of the richness of these western territories in precious stones. They have possession of some of the richest ground in the diamond region. Their prospectors, who have recently returned to Denver, bring the most positive reports of discoveries."

Dan Hausel, senior geologist, State of Wyoming: In my opinion, the Great Diamond Hoax delayed the discovery of diamonds in Colorado. For decades after, nobody in his right mind would have believed diamonds could have been found anywhere in this region. People would've been laughed out for proposing that there were diamonds in Colorado.

In 1977 and 1978, corporate geologists told me that what was going on was just another hoax.

In the summer of 1871, John Slack and Philip Arnold stepped off the west-bound Central Pacific Railroad train at Lathrop, California, where they met up with a San Francisco businessman named Asbury Harpending.

No one in the party was burdened by a sterling character. Harpending was trying to rehabilitate his reputation, which had declined considerably after his conviction for privateering during the Civil War. Yet at their meeting, it was Slack and Arnold, a barely literate native of Kentucky who'd been drawn to California by the gold rush, who looked the worse for wear.

"Both were travel-stained and weather-beaten men, and had the general appearance of having gone through much hardship and privation," Harpending later recalled in his autobiography. "They said they had luckily struck a spot which was enormously rich in stones, which they estimated to be worth two million dollars."

That was enough information for Harpending, who was always looking for an investment with a quick and multiple turnaround. Several days later he traveled to New York, where, armed with the promise of easy riches, he lured a who's who of the city's rich and powerful to a lawyer's office on the East Side. Included in the group was Charles Tiffany, of the jewelry house; former Union general George McClellan; Horace Greeley, owner of the New York Tribune; and a handful of prominent New York bankers. Harpending dramatically emptied a bag onto a table in the middle of the businessmen and relished their reaction.

"Tiffany soberly sorted the stones into little piles, held individual stones up to the light with the air of a professional connoisseur, gave them a thorough examination, and displayed all the nuances of the jeweler's art," noted one account of the meeting. "After satisfying himself of the genuineness of the stones before him, he confirmed that they were, indeed, diamonds, rubies, emeralds, and sapphires...Two days later, Tiffany returned to say he had placed a valuation of $150,000 on the entire lot."

As the appraised gems accounted for only a tenth of the stones that Arnold and Slack supposedly had gathered in only a matter of days, word of a mine of unimaginable wealth whipped through New York like a strong wind. Back in San Francisco, Arnold was under intense pressure to reveal the site of the gem fields but managed to deflect questions about its location for several months, claiming that deep snows and frigid temperatures made travel there impossible.

While they waited for the first thaw, the moneymen took steps to ensure that they wouldn't have to share the lucrative find with interlopers or, for that matter, the public at large. They formed a prospecting company and hired Henry Janin, then the country's most prominent geologist, to confirm the find.

In exchange for 1,000 shares in the new company, they also bought the services of another general serving in Congress, Benjamin Butler. That partnership soon paid off; in May 1872, at Butler's urging, Congress passed "An Act to Promote the Development of Mining Resources in the United States."

The new law contained wording favorable to anyone thinking of prospecting that summer: "All valuable mineral deposits in lands belonging to the United States, both surveyed and unsurveyed, are hereby declared to be free and open to exploration and purchase." In case anything about that was too vague, three months later the U.S. attorney general clarified that "the terms 'valuable mineral deposits' used in the act of May 1872...include diamonds."

By early summer the investors were well on their way to raising the $10 million they calculated would be necessary to clean out the diamond fields. But they were most eager to see the treasure for themselves. So on June 1, 1872, a group of a half-dozen disembarked from the train in Rawlins, Wyoming, mounted horses and fell in behind Arnold and Slack as they headed to the fabulous discovery.

The trip took four days. "The spot was at a high elevation, about 7,000 feet above sea level, I think," Harpending wrote. "Physically, it embraced a small mesa or rather gently sloping basin, littered here and there with rocks comprising about thirty or forty acres."

Although most of the riders didn't know it at the time--Arnold and Slack had taken a purposely circuitous route--the location turned out to be in northwestern Colorado, on a 3,000-acre mesa just south of the Wyoming line and barely east of the Utah border.

The prospecting party arrived at its destination about 4 p.m. Ignoring the fading sun, the men instantly dismounted their horses and began scrabbling about in the dirt with their knives.

"I had not been on the ground three minutes before I found a large diamond," Harpending told a reporter six months later. "That day we got over 500 diamonds, rubies, sapphires and emeralds."

Several days later, after some surveying and a lot of pocket-filling, the men left the fields. They reached Cheyenne on June 20 and dispatched an encoded telegraph describing the astounding find.

Even Janin, swept up by the fever, temporarily abandoned his geological evaluation to advise a "buy" option to anyone fortunate enough to be given an opportunity to invest in the mine. "No evidence was gathered which could authorize me to do other than to recommend investment at the price of $40 per share," he wrote in his report of the expedition. "I feel perfectly safe in expressing the belief that the amount of the purchase money will be speedily repaid in dividends, to be followed by large additional profits."

For the investors, such good fortune was impossible to conceal. Details of Janin's report promptly leaked to the public, first by word of mouth and then, eventually, through newspaper reports. Fanning would-be prospectors' imaginations was the fact that diamonds were already on everyone's mind: It had been only a few years since the discovery of the first, vast diamond fields in South Africa.

The country spun into a frenzy.

Howard Coopersmith, geologist: I heard of the Diamond Hoax years and years ago. It's a story that passes around everybody in the diamond business, and certainly among geologists in Colorado.

I moved to Colorado from California in 1971 to enroll at Colorado State University. I knew a friend of a friend of a professor there. I had no idea I'd want to major in geology, but ever since I was a kid I liked to travel, and the mountains and getting outside. I was randomly assigned Malcolm McCallum as an advisor.

Malcolm McCallum, professor emeritus of geology: I started at CSU in 1962, when I came there from Laramie. My specialty at that time was pre-Cambrian geology. But I was looking for some local things to do, because most of my work had been in Wyoming and Montana--weekend things.

Well, there were some rock specimens lying around the department, and the chairman told me to try and figure out what they were. He told me where they had been found, and I looked at them. And I discovered that they were indeed unusual rocks.

Dan Hausel: Kimberlite is a complicated rock. It is derived from the earth's upper mantle, about 90 to 120 miles down into the ground, and it occurs primarily in pipes. Because they extend down to the place in the earth where diamonds are stable, kimberlite pipes act like a giant geological retrieval system for diamonds.

Malcolm McCallum: As I started mapping and working on these rocks, and in talking with various people in the United States Geological Survey, I concluded that they had to be a diatreme--or pipe--of kimberlite. That's the type of rock mostly generally associated with containing diamonds.

Frank Yaussi, private prospector, Fort Collins: I don't get along so well with Malcolm McCallum. He wanted to be first and he wanted the glory, which I didn't care about. I wouldn't go so far as to say he was the first to discover diamonds. But he likes to tell people that.

I started prospecting up there in 1957. We were looking for precious metals, mostly gold, when we found this peculiar outcropping about 35 miles northwest of Fort Collins. It was just green rock, showing up on the side of the hill, and greens is sometimes associated with gold. We didn't know what it was, but there was already an abandoned tunnel in there, about six feet wide and six feet tall. It was a dark, dull green.

It wasn't too long after that, when the beryllium boom was on, a geologist from back East was here. We was trying to get him interested in some mines. He saw the outcropping and asked what it was. Well, we went over there, and he identified it right away as a kimberlite. We thought it was really far-fetched at the time. Except for Arkansas, we really never thought much about diamonds in the United States.

So I started looking for diamonds. But I didn't know what they looked like. I was doing strictly visuals, panning for them mostly, but we didn't really know what we was looking for. Finally we gathered enough information, from looking in museums and such, that we eventually found some. My wife found a one-sixth-carat stone.

In the early 1970s we were sending terrazzo chips to Wyoming Tile and Terrazzo in Cheyenne for polishing, and they broke a saw blade on one of them. That's when Malcolm McCallum got interested. I had even turned a kimberlite sample over to him and CSU several years before, but he had identified it as serpentine. He didn't know it was kimberlite until he went to that conference and someone told him what it was.

Malcolm McCallum: In 1973 I went to the first International Kimberlite Conference, in South Africa, and I brought samples from our research sites outside of Fort Collins. People were telling me that I was crazy--everyone knew that there were no diamonds in North America. Obviously, though, as soon as you have kimberlites, you recognize there could be diamonds.

Despite that, we decided early on that we weren't going to look for diamonds, because we'd lose access to our research sites. But in 1975 we were preparing kimberlite rock samples, and one of them chewed up a lap wheel at the USGS office at the Federal Center, in Denver. They called me and said, "One of your sections wrecked our lap wheel."

I said, "Don't touch a thing."
Dan Miller, director of Wyoming's Geological Survey, 1969-1981: Malcolm was working with a number of grad students at the time. He had them collecting small, bowling-ball-sized samples. The lab would then put them on a diamond saw--steel impregnated with diamond dust--and cut slices.

This one wouldn't cut, though. The saw kept bucking. It's like trying to saw a board with nails and the blade just keeps stopping. It would hit something and just bounce. The lab tech eventually became frustrated and broke his way through, ruining the saw. It just didn't register that there could be anything in the sample harder than the saw.

So next they tested it on a lap wheel--a horizontal steel grinding wheel, like a mill stone. And things just weren't grinding right. In fact, when the tech lifted up the sample, he found that gouges had been made in the steel. To a geologist, that's just inconceivable. There's only a couple things in the world capable of that.

They looked under the microscope, and there were diamonds. Minute, tiny diamonds. But there were lots of them.

Malcolm McCallum: Once this thing turned up in our labs, of course, we had to announce it.

Dan Miller: I was seated at my desk at the Wyoming Geological Survey building when the telephone rang, just like any old telephone call. The voice said, "This is Vince McKelvy." I didn't recognize the name at first, but he said, "You remember me; I'm the director of the USGS."

We chatted a bit, and then he said, 'I have something important to tell you. But you must promise not to divulge anything I say for at least three days--and that means not even to your wife. It will cause a great deal of excitement in a certain segment of the business community.'

Then he said, "Diamonds have been discovered in Wyoming."
The reason I couldn't tell anyone, of course, is that you can't imagine the rush it would cause. If a prospector reads in the evening paper anything having to do with the potential of a mineral discovery, he'd be in his car right now, dinner left on the table, and he'd be there by midnight. You cannot believe what the human mind is capable of in terms of greed.

As soon as I got off the phone, I made a quick phone call to the governor's office. At that time, it was an old friend of mine, Stanley Hathaway. I didn't tell him about the diamonds. I said, "I have some very, very important information that I can't tell you right yet. But I need to set up an appointment as soon as possible."

Three days later we met. At the end of my presentation I looked up at the governor, and he was grinning. He just kept grinning at me. Eventually, he said, "Now, Dan, you will take care of this problem, won't you?"

It's one of those things that an exploration geologist gets to experience once in a lifetime. We knew that as soon as the information got out of the room, all hell was going to break loose. And it did. People came from South Africa within 48 hours.

We had many, many phone calls. The phones rang steadily for a week, wanting details. Well, we didn't have any details. But people from South Africa wanted to know: What was the terrain where the diamonds were discovered? What was the climate?

In the fall of 1872, newspapers throughout the West offered daily speculation as to the location of the fields where diamonds and rubies lay scattered about like spilled marbles. Guesses ranged from sites in Arizona and New Mexico to ones in Colorado and Nevada.

Denver's newspapers touted the prospect of diamonds in the backyard, although nobody knew for sure where, exactly, that might be. "Colorado is just as good a place to hunt diamonds in as Arizona or South Africa," the Denver Times mused.

The Rocky Mountain News was more circumspect. "Let no green youth drop his implements of husbandry and hie to the Rio Grande or the farther reaches of Colorado in quest of sudden fortune in the shape of heaps of diamonds like pigeon's eggs in size and of the finest, rarest quality," the paper editorialized.

The city paid no attention. "Denver was ablaze with excitement. There were diamond headquarters here, there and everywhere," the Denver Tribune recalled a half-dozen years later. "Everybody was either president, vice-president or prospector of a diamond exploring party."

The fervor filtered up. Governor William Gilpin--no geologist, but a one-man chamber of commerce--accepted an invitation to lecture on the "Diamond Regions of Colorado and New Mexico," a subject on which he knew little but believed much. In fact, during his speech he revealed the location of the diamond fields as being in southern Colorado, providing a geological description of the area to back himself up.

Soon, and despite his paper's own editorial warning, Rocky Mountain News owner and publisher William Byers couldn't help himself, either. Together with eight more of the city's most prominent businessmen, he formed the Denver Diamond Company in November 1872.

The venture was overdue, the rival Tribune observed, even then expressing the city's fear of being left behind. "We think it is high time for our Colorado Company to 'put in its oar.' It is a burning shame that we should have allowed other cities to have secured such great advantages over our town."

In all, 25 mining and speculation companies formed that year, with an estimated capitalization of a quarter-billion dollars.

Dan Hausel: I figure the rush eventually attracted about 35 prospectors and companies into the region.

Even then, I don't think everybody believed there were diamonds in Wyoming. Geologists tend to rely too much on geo-chemistry--that the surrounding rock should have the same chemistry as diamonds. Well, it's true that according to the geo-chemistry, you shouldn't have well-preserved diamonds in this area.

After the diamonds were discovered, we solicited proposals from companies to explore the area and test it. We eventually gave a contract to a company called Cominco.

George Tikkanen, former head of exploration, Cominco American: We're primarily a metals mining company. But at that time, we also had an interest in a small diamond mine in South Africa. So we also started doing some work in the late 1970s in Canada and the United States. We had quite an aggressive program in the State Line region [on the Wyoming/Colorado border northwest of Fort Collins]. We spent millions of dollars there.

Howard Coopersmith: I had graduated in 1975 and started on my master's degree. But then I went to work for Cominco, this company based in Vancouver, B.C. They'd heard the news and come out. They wanted to start a diamond mining operation in the State Line region, but they had no idea how to do it.

Malcolm McCallum: Howard never did finish his master's degree after he went to work for Cominco. It was very disappointing to me--especially since his thesis was being funded by the National Science Foundation. In terms of any prospecting I might do, the federal funding was an ethical problem for me.

Many people have since asked me, "You knew where these things were. Why didn't you go out and pick them up?" The reason is, it just wouldn't have been ethical: The government was supporting my research.

Chuck Mabarek, geologist, Fort Collins: I worked for Cominco for a summer, although I was more interested in the research rather than just finding diamonds. I would go out and look in streams and stream beds for chromian diopside and garnets. If you are getting these minerals, you know that somewhere upstream, you've probably got some kimberlite pipes.

Dan Miller: Kimberlite looks like nothing more than caked old mud balls. It's got a greenish, purplish sheen to the rock, depending on the slant of the sun. In South Africa people go out just before the gray daylight, when there is the faintest dew on the ground, and they look at anthills and other holes that have been dug by burrowing animals during the night, when they carry soil from underground to above. And sometimes you can see the greenish hue of kimberlite caught in the morning light.

In some instances, that's how they have found diamonds.
Malcolm McCallum: The mining-company geologists immediately went around checking out the locations where we had the [CSU] studies going. They also did some of their own exploration, but not much.

They were going around to the ranchers with contracts for them to sign. Some were even sneaking around. In one case, a mining-company representative told the ranchers that he had permission from me and CSU to look around on the property. Well, the rancher knew me enough and figured that wasn't something I'd do, so he called me. I told him no, we haven't given anyone permission.

Basically, they never found anything more than what we had found during our research projects. The worst part was that we lost access to most of the sites we'd been working on. Before, the local ranchers had even helped us find some stuff--they were just interested in what we were doing. But then, when the rush started, many of them said, "We can't tell everyone else that they can't come on and then allow you on."

Howard Coopersmith: It was extremely intense competition. Everywhere you went, there were other geologists out in the field, trying to do it better and faster. Occasionally I would knock on some rancher's door to ask if I could look around on his land, and he'd say, "You just missed so-and-so"--a geologist from another company.

I basically knocked on every door between Boulder and Casper. Everybody looks for the romance. But mostly it was just going through a lot of pairs of boots.

Dan Miller: After a while, Cominco flew some of us from Wyoming out to their labs in Spokane, and we toured the facility. They were taking huge kimberlite samples out of the State Line region. Then they'd build special boxes--seven or eight cubic feet--and fill them with kimberlite and ship them out for analysis.

Cominco had found a lot of diamonds. They'd carefully hand-picked them out and put them on glass slides. Most were just the size of a pin. But there were dozens and dozens and dozens of them.

From that point on, they didn't tell us anything more than they had to. After about a year they submitted a statement saying there was sufficient reason to build a lab just outside of Fort Collins. Everyone was going berserk in those days.

In late 1872 geologist Clarence King, who seven years later would help establish the USGS and become its first director, was finishing up a huge project, leading the Fortieth Parallel Survey. Between trips to the field, he heard about the diamond rage and the riches being found at a mysterious location somewhere in the Rocky Mountains. "No one with normal senses could have missed signs of gem-stone fever during that hectic summer," King's biographer, Thurman Wilkins, wrote.

At the time, speculation as to the location of the mines centered on Arizona. But by calling upon his extraordinary familiarity with the West, King was able to do what thousands of speculators could not: Using only the meager clues leaked out by Arnold and others to the press, King nailed the site of the fabled mines. He later explained his geological gumshoeing:

"I knew from the condition of the Snake, Bear and Green Rivers...at the time unfordable, that [the diamond party] had not gone to Arizona, as alleged, and from the report of Janin I had learned that the discoveries had been made upon a mesa upon a pine timber. From a knowledge of the country, I was certain that there was only one place in that country which answered to the description."

King's detective work was soon confirmed by a pair of colleagues. Through sheer coincidence, five months earlier two of his geologists had been on the same train out of Rawlins as Harpending's party on its return from the diamond fields. Under the guise of professional curiosity, the geologists had pieced together scraps of information dropped by the jubilant prospectors. When they combined those tidbits with their knowledge of the land, they, too, had pinpointed the Colorado location.

On October 29 King met his fellow geologists at Fort Bridger and set out to find the gem fields. By then winter was fast approaching, and Colorado's weather had already turned bitter. Ice balls formed on the horses' legs during stream crossings and "rattled as they went like rude castanets," a member of the party wrote in his diary.

It took the trio six days to travel to the area that King had calculated as the probable site. They camped at the head of a gulch and rode in the following morning. Incredibly, after only fifteen minutes, King sighted a notice fastened to a tree claiming the rights to the stream and signed by Henry Janin. Within an hour the geologists had followed tracks to a windblown field. They dismounted and began to dig.

"Gemstone fever hit them hard, and kept them searching the sandstone floor as long as daylight lasted," Wilkins wrote. "Each discovered several rubies, but diamonds were harder to find. They found three diamonds between them."

But the second day of prospecting brought some unsettling revelations. For starters, King and his men determined that no matter where the gems were uncovered--most of the precious stones were found in anthills--they occurred in nearly identical proportions: one diamond per dozen rubies. Other diamonds were discovered in unlikely locations--perched on windswept, exposed outcroppings and jammed into crevices.

The men looked closer. Soon they observed that at the base of the anthills containing gems was evidence of small holes clumsily covered up; anthills without the holes held no diamonds or rubies. King ordered a systematic search of the area, instructing his men to dig to the bedrock, where, because of their specific gravity, diamonds ought to congregate. They found nothing.

Dan Miller: We finally got a letter from Cominco one day in 1986 or so, saying they'd decided not to pursue their State Line operations anymore.

Dan Hausel: Eventually everyone left. Except for Howard.
Howard Coopersmith: We had had short periods of excitement or enthusiasm. There are only about 4,000 known kimberlite pipes anywhere on earth, so anytime you found one it was significant. We usually opened a bottle of champagne when we discovered a new one. We eventually found thirty kimberlites in the State Line region.

But there were also periods of two or three years when you wouldn't find anything and wondered whether you should keep going. It got really depressing, particularly in the early 1980s.

Still, I kept pushing and promoting and trying to keep the project going. But it didn't work. We'd had a lot of technical successes--we found a lot of kimberlite and we found a lot of diamonds, up to a carat in size. I believed very simply that the job wasn't finished. I couldn't write off the area because I hadn't explored all of it yet. There were still holes.

George Tikkanen: It's quite common for a geologist to say, "Just a little more work and we'll be there." But we had decided the diamond business really wasn't one we wanted to be in. We had done a lot of work and not come up with anything of interest.

In addition, the diamond business is extremely difficult. Even after you've found diamonds, you don't know what they're worth--it depends on the quality of the stone, the size and the flaws and so on.

And then there's the market. Zinc and copper have commodities exchanges and are publicly traded on the open market. But diamonds are an extremely specialized market, controlled by one company, De Beers, which buys up surpluses to control prices. They have an absolutely staggering ability to support the market when prices are weak. It makes it very difficult to figure out what your product is worth.

Besides, we were looking for something quite large. There was a kimberlite pipe found recently in Botswana. De Beers poured $800 million into it to develop the site--and it paid off in three months. That's the kind of thing we were after.

Howard Coopersmith: In the summer of 1986 the company told me, "That nice salary you've been enjoying isn't coming anymore." You could see it coming every day. I'd made trips to Vancouver, trying to convince them to stay. But they'd made up their mind.

So that summer I went out on my own. And I found the first kimberlite at Kelsey Lake that fall. I just went out one day and found it. I had good suspicion I should be looking there. It was just me and the cows. In the spring of 1987 I went up and discovered the second large kimberlite on the ranch, a couple thousand feet away.

Malcolm McCallum: I get a kick out of Howard's stuff. I think he's started to believe his own press. The pipes he "discovered" had been known to us since the early 1960s. That's when a colleague of mine actually had pinpointed those things. Once, when Howard was doing work up there, after he'd "found" the pipes, I went up with some of our research maps showing him that we'd located some of these things fifteen years before.

He did refind them, I suppose, but it was hardly original. To say he discovered them is not quite right.

Dan Hausel: Howard's "discovery"? Yeah, it's puzzling. I've got a map with all the locations of kimberlite in the district from about 1967. And it shows the Kelsey Lake kimberlites.

Howard Coopersmith: There are only a few hundred diamond geologists in the world, and only a few dozen with significant experience. Soon after I discovered those pipes I got a call from a colleague in Australia. He said he was forming a new diamond mining company and wanted me to handle the North American part.

I said, "That sounds good. I got a couple of new kimberlites; let's put them into the company." I couldn't really do anything on my own with them. I just didn't have enough money.

I also started talking to the family that owned the ranch where I found them. They're an old ranching family, and they weren't really sure they wanted a mine on the area. It took months and months of negotiation, explaining what we wanted to do. I'm sure that if I hadn't persisted, they sure wouldn't have come chasing after me.

But I wasn't about to give up very easily now. We got the lease done at the end of 1987.

Rancher who owns the land where diamonds were discovered: I don't want to talk about that.

Malcolm McCallum: Howard's principal contribution to all of this was that he did go out and do some detailed work up there, and he did convince the owners of the land to allow it to be exploited. For a long time they didn't want anybody on their land.

But Howard became very good friends with them--I think he even got married up on that ranch. And I heard that the family also ran into economic problems, which changed their mind about mining there.

You gotta give the guy credit for hanging in there.
Howard Coopersmith: The next few years we spent testing and fundraising. It was always a struggle to keep it alive. We had a hard time interesting people in this country; many of them simply said, "There are no diamonds in the United States." So we had to go to areas where diamonds are understood to look for investors: South Africa, Australia, Europe.

We also hadn't found anything big yet. In the two pipes, the biggest diamond we'd found was two-tenths of a carat, so we had to use that to sell the mine.

There were other problems: The low price of gold had depressed mine investing in general, and the Bre-X scandal in Indonesia hurt all the legitimate companies. Eventually, though, we got enough money, and we began commissioning the mine in the fall of 1996.

By the end of 1872, the details of the diamond hoax were coming into focus. Subsequent investigations revealed that Arnold had cashed in on a previous gold-mining deal several years earlier; using that money, he had traveled twice to London, each time leaving from Canada under an assumed name. Once in England, he'd purchased handfuls of raw, uncut gems of low quality--in all, about $35,000 worth.

In 1870 Arnold returned to California and, with his partner, Slack, began creating a diamond field with the illusion of endless wealth. The men selected northwestern Colorado as the site for their "mine" because of its out-of-the-way location and its still-aggressive Indian population, which would discourage most prospectors from nosing around. Then, over the course of several trips to the area--each time leaving from a different Wyoming railroad station to throw off suspicion--Arnold planted the stones, scattering them about by hand, poking them into the ground with rods and, finally, covering his tracks. With the gems in place, they made their play.

In his memoirs, Harpending claimed he was taken just like everyone else. "How so many of the shrewdest men in the world could have been absolutely duped by the great diamond fraud may well be asked," he wrote in a chapter titled "Victim of Big Swindle Explains How Rough Miners Managed to Deceive Men Like Tiffany and Janin."

"The truth is it succeeded not because of the baleful craft employed in working out its details, but because of a rawness that seemed to disarm rather than arouse suspicion and the audacity and nerve with which everything was carried out. That diamonds, rubies, emeralds and sapphires were found associated together--gems found elsewhere in the world under widely different geological conditions--was a fact that ought to have made a goat do some responsible thinking."

But Harpending's early and active involvement in the scheme still has some modern investigators wondering about his complicity. "I'm not so sure he was innocent," says Dan Hausel, who is researching a book on the scam. "I think he may have helped finance the hoax."

Although it was widely recognized that Arnold had perpetrated the scam, he was permitted to retire to his hometown of Elizabethtown, Kentucky. From there he deflected accusations of his chicanery with bluster.

"I see by the papers that Arnold and Slack are to be prosecuted and eminent counsel has been employed," he wrote in a letter to financiers in San Francisco. "I have employed counsel myself--a good Henry rifle--and I am likely to open my case any day on California Street." Nevertheless, after hiding for months, Arnold settled the prosecution's case against him for $150,000--leaving him with at least that much again in scammed profits.

"Arnold was no ordinary mortal," Harpending reflected at last. "Throughout all the negotiations, coming in contact with some of the most alert intellects of the time, he was always serene, ready, confident--did not make a single break...Both [he and Slack] had the dramatic gift highly developed. On the stage they might have made the most famous actors of any time."

Howard Coopersmith: It was September 1996. I remember getting the call. I had just left the mine, and I got a call on my cell phone. They had found a 28.3-carat stone, which is about three-quarters of an inch across. It was eventually polished down to a 5.4-carat gem, which was sold to Hyde Park. They sold it to an anonymous Denver buyer that December [for $90,000].

The second big find came in August 1997. I think I was in my truck again and got another call on my cell phone. The guys at the site weren't quite sure what it was. So I came back and put it under the microscope. It turned out to be a 28.2-carat diamond, which, after cutting, yielded a nearly 17-carat gem (later appraised at more than $500,000).

So far we've mined six of the twenty largest diamonds ever found in the U.S. I'm sure we'll get even larger diamonds. There's no reason to think we won't. This is a new deposit. Nobody knows what it can produce.

Dan Hausel: About seven or eight years ago a retired USGS geologist named Lowell Hilpert took me up to the diamond-hoax site, at the foot of Diamond Peak. Within about two hours I found 4 diamonds, 17 rubies and 24 pyrope garnets. That stuff is still there.

The interesting thing is, we now know that the area that was salted is in a place where all geological indications are that you'd expect to find diamonds. Today it would be considered an active area for exploration.

Recently, a company called Guardian Minerals claimed it found some diamonds in the Green River Basin [in Wyoming, just north of the hoax site]. The chemistry there suggests that it's not favorable to diamonds. But you never know.

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